XASE:GOK Quarterly Report 10-Q Filing - 3/31/2012

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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-33460

 

GEOKINETICS INC.

(Name of registrant as specified in its charter)

 

DELAWARE

 

94-1690082

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1500 CityWest Blvd., Suite 800

Houston, TX  77042

 

Telephone number:  (713) 850-7600

Website: www.geokinetics.com

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o  No  x

 

Common Stock, par value $0.01 per share.  Shares outstanding on May 2, 2012: 18,990,290 shares

 

 

 



Table of Contents

 

GEOKINETICS INC.

INDEX

 

Glossary of Certain Defined Terms

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

Condensed Consolidated Balance Sheets—as of March 31, 2012 (Unaudited) and December 31, 2011

4

 

 

Condensed Consolidated Statements of Operations (Unaudited) — for the Three Months Ended March 31, 2012 and 2011

5

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) —for the Three Months Ended March 31, 2012 and 2011

6

 

 

Condensed Consolidated Statement of Shareholders’ Deficit and Accumulated Other Comprehensive Income (Unaudited) — for the Three Months Ended March 31, 2012

7

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

37

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

Item 3.

Defaults Upon Senior Securities

39

 

 

 

Item 4.

Mine Safety Disclosures

39

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

 

Signatures

41

 

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Table of Contents

 

Glossary of Certain Defined Terms:

 

2002 Plan

 

2002 Stock Awards Plan

2007 Plan

 

2007 Stock Awards Plan

2011 Form 10-K

 

Annual Report on Form 10-K for the year ended December 31, 2011

2010 Plan

 

2010 Stock Awards Plan

2D

 

Two-dimensional

3D

 

Three-dimensional

4D

 

Four-dimensional

ASC

 

Accounting Standards Codification

ASU

 

Accounting Standard Update

Avista

 

Avista Capital Partners, L.P.

Company

 

Geokinetics Inc., collectively with its subsidiaries

EBITDA

 

Earnings before interest, taxes, depreciation and amortization

Exchange Act

 

Securities Exchange Act of 1934, as amended

FASB

 

Financial Accounting Standards Board

GAAP

 

United States generally accepted accounting principles

Geokinetics

 

Geokinetics Inc., collectively with its subsidiaries

Holdings

 

Geokinetics Holdings USA, Inc.

IASB

 

International Accounting Standards Board

Lenders

 

Lenders party to the Whitebox Revolving Credit Facility, from time to time, and their respective successors, as permitted thereunder. References to “Lenders” include the original lenders party to the Forbearance Agreement and Amendment No. 5, as applicable

Levant

 

Levant America, S.A.

LIBOR

 

London InterBank Offered Rate

Multi-client

 

Multi-client seismic data acquisition and seismic data library business

NOCs

 

National oil companies

NYSE Amex

 

New York Stock Exchange Amex

Notes

 

9.75% Senior Secured Notes issued in December 2009, due December 2014

OBC

 

Ocean bottom cable

PGS

 

Petroleum Geo-Services ASA

PGS Onshore

 

Certain entities and assets formerly comprising PGS’s worldwide onshore seismic data acquisition and multi-client seismic data acquisition business

RBC

 

Royal Bank of Canada

RBC Revolving Credit Facility

 

Revolving credit and letters of credit facility entered into on February 10, 2010 with a group of lenders led by RBC

SEC

 

Securities and Exchange Commission

Securities Act

 

Securities Act of 1933, as amended

Whitebox Advisors

 

Whitebox Advisors LLC, as administrative agent for the lenders under the Whitebox Revolving Credit Facility

Whitebox Revolving Credit Facility

 

Revolving credit facility entered into with the Lenders and Whitebox Advisors as the administrative agent initially via the assignment, on May 24, 2011, of the RBC Revolving Credit Facility rights and obligations. An amended and restated credit agreement was entered into with the Lenders on August 12, 2011

 

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Table of Contents

 

Geokinetics Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

47,684

 

$

44,647

 

Restricted cash

 

2,524

 

3,060

 

Accounts receivable, net of allowance for doubtful accounts of $2,764 at March 31, 2012 and $2,757 at December 31, 2011

 

132,088

 

160,736

 

Deferred costs

 

13,029

 

13,941

 

Prepaid expenses

 

14,877

 

12,747

 

Other current assets

 

4,950

 

3,269

 

Total current assets

 

215,152

 

238,400

 

Property and equipment, net

 

203,025

 

212,636

 

Multi-client data library, net

 

28,643

 

41,512

 

Deferred financing costs, net

 

12,262

 

12,987

 

Restricted cash

 

10,000

 

 

Other assets, net

 

8,923

 

8,637

 

Total assets

 

$

478,005

 

$

514,172

 

 

 

 

 

 

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term debt and current portion of long-term debt and capital lease obligations

 

$

5,751

 

$

4,543

 

Accounts payable

 

59,845

 

79,300

 

Accrued liabilities

 

89,251

 

79,836

 

Deferred revenue

 

28,266

 

32,675

 

Income taxes payable

 

17,533

 

18,969

 

Total current liabilities

 

200,646

 

215,323

 

Long-term debt and capital lease obligations, net of current portion

 

350,965

 

350,183

 

Deferred income taxes

 

8,082

 

8,062

 

Derivative liabilities

 

3,919

 

5,778

 

Mandatorily redeemable preferred stock

 

55,511

 

53,210

 

Other liabilities

 

1,122

 

1,122

 

Total liabilities

 

620,245

 

633,678

 

Commitments and contingencies

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

Preferred stock, Series B Senior Convertible, $10.00 par value; 2,500,000 shares authorized, 360,008 shares issued and outstanding at March 31, 2012 and 351,444 shares issued and outstanding at December 31, 2011

 

85,715

 

83,313

 

Stockholders’ deficit:

 

 

 

 

 

Common stock, $.01 par value; 100,000,000 shares authorized, 19,364,299 shares issued and 18,990,290 shares outstanding at March 31, 2012 and 19,289,489 shares issued and 18,990,290 shares outstanding at December 31, 2011

 

193

 

193

 

Additional paid-in capital

 

226,498

 

228,410

 

Accumulated deficit

 

(454,666

)

(431,442

)

Accumulated other comprehensive income

 

20

 

20

 

Total stockholders’ deficit

 

(227,955

)

(202,819

)

Total liabilities, mezzanine equity and stockholders’ deficit

 

$

478,005

 

$

514,172

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

 

Geokinetics Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Revenues

 

$

163,498

 

$

187,637

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

Direct operating

 

126,939

 

150,291

 

Depreciation and amortization

 

33,342

 

40,537

 

General and administrative

 

17,248

 

18,293

 

Total expenses

 

177,529

 

209,121

 

Loss from operations

 

(14,031

)

(21,484

)

Other income (expenses):

 

 

 

 

 

Interest income

 

42

 

209

 

Interest expense

 

(12,781

)

(11,358

)

Gain from change in fair value of derivative liabilities

 

1,884

 

4,443

 

Foreign exchange gain (loss)

 

252

 

(47

)

Other, net

 

2,350

 

100

 

Total other expense, net

 

(8,253

)

(6,653

)

Loss before income taxes

 

(22,284

)

(28,137

)

Provision for income taxes

 

940

 

634

 

Net Loss

 

(23,224

)

(28,771

)

Preferred stock dividends and accretion costs

 

(2,426

)

(2,203

)

Loss applicable to common stockholders

 

$

(25,650

)

$

(30,974

)

 

 

 

 

 

 

For Basic and Diluted Shares:

 

 

 

 

 

Loss per common share

 

$

(1.35

)

$

(1.74

)

Weighted average common shares outstanding

 

18,990

 

17,824

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

 

Geokinetics Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

OPERATING ACTIVITIES 

 

 

 

 

 

Net loss

 

$

(23,224

)

$

(28,771

)

Adjustments to reconcile net loss to net cash provided by operating activities: 

 

 

 

 

 

Depreciation and amortization

 

33,342

 

40,537

 

Bad debt expense

 

 

1,986

 

Amortization of deferred financing costs and accretion of debt discount

 

1,396

 

1,185

 

Stock-based compensation

 

515

 

705

 

(Gain) loss on disposal, exchange and sale of assets

 

(1,173

)

191

 

Change in fair value of derivative liabilities

 

(1,884

)

(4,443

)

Changes in operating assets and liabilities: 

 

 

 

 

 

Restricted cash, net of investing portion

 

536

 

699

 

Accounts receivable

 

28,648

 

(5,123

)

Prepaid expenses and other assets

 

(3,736

)

(5,467

)

Deferred costs

 

912

 

(267

)

Accounts payable

 

(19,455

)

18,729

 

Deferred revenue

 

(4,409

)

7,924

 

Accrued liabilities and other liabilities

 

10,216

 

(1,359

)

Net cash provided by operating activities

 

21,684

 

26,526

 

INVESTING ACTIVITIES 

 

 

 

 

 

Investment in multi-client data library, net

 

(16,661

)

(18,639

)

Purchases and acquisition of property and equipment

 

(3,456

)

(8,293

)

Purchases of other assets

 

(383

)

(1,079

)

Proceeds from sale/disposal of assets

 

13,059

 

49

 

Change in restricted cash

 

(10,000

)

 

Net cash used in investing activities

 

(17,441

)

(27,962

)

FINANCING ACTIVITIES 

 

 

 

 

 

Proceeds from issuance of debt

 

 

10,000

 

Net change in short-term debt

 

244

 

 

Payments on capital lease obligations and vendor financing

 

(1,150

)

(367

)

Payments on debt

 

 

(200

)

Payments of debt issuance costs

 

(300

)

(65

)

Net cash provided by (used in) financing activities

 

(1,206

)

9,368

 

Net increase in cash

 

3,037

 

7,932

 

Cash at the beginning of period

 

44,647

 

42,851

 

Cash at the end of period

 

$

47,684

 

$

50,783

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information: 

 

 

 

 

 

Cash disclosures:

 

 

 

 

 

Interest paid

 

$

1,911

 

$

739

 

Income taxes paid

 

$

1,100

 

$

2,451

 

Non-cash disclosures:

 

 

 

 

 

Capitalized depreciation to multi-client data library

 

$

1,083

 

$

1,392

 

Purchases of property and equipment under capital lease obligations and vendor financings, net of down payments

 

$

2,430

 

$

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

 

Geokinetics Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Deficit
and Accumulated Other Comprehensive Income

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common
Shares
Issued

 

Common
Stock

 

Additional
Paid-In
Capital

 

Accumulated
Deficit

 

Accumulated
Other
Comprehensive
Income

 

Total
Stockholders’
Deficit

 

Balance at December 31, 2011

 

19,289,489

 

$

193

 

$

228,410

 

$

(431,442

)

$

20

 

$

(202,819

)

Stock-based compensation

 

 

 

515

 

 

 

515

 

Restricted stock issued, net

 

74,810

 

 

 

 

 

 

Accretion of preferred issuance costs and discounts

 

 

 

(286

)

 

 

(286

)

Accrual of preferred dividends

 

 

 

(2,141

)

 

 

(2,141

)

Net loss

 

 

 

 

 

(23,224

)

 

(23,224

)

Balance at March 31, 2012

 

19,364,299

 

$

193

 

$

226,498

 

$

(454,666

)

$

20

 

$

(227,955

)

 

See accompanying notes to the condensed consolidated financial statements.

 

7



Table of Contents

 

GEOKINETICS INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1: General

 

Organization

 

Geokinetics Inc., a Delaware corporation founded in 1980, is based in Houston, Texas.  The Company is a global provider of seismic data acquisition, processing and integrated reservoir geosciences services, and a leader in providing land, transition zone and shallow water OBC environment geophysical services.  These geophysical services including acquisition of 2D, 3D, time-lapse 4D and multi-component seismic data surveys, data processing and integrated reservoir geosciences services for customers in the oil and natural gas industry, which include national oil companies, major international oil companies and independent oil and gas exploration and production companies worldwide.  Seismic data is used by these companies to identify and analyze drilling prospects and maximize successful drilling.  The Company also owns a multi-client seismic data library whereby it maintains full or partial ownership of data acquired; client access is provided via licensing agreements.  The Company’s multi-client seismic data library consists of data covering various areas in the United States, Canada and Brazil.

 

Basis of Presentation

 

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared on the accrual basis of accounting in accordance with GAAP and pursuant to the rules and regulations of the SEC.  Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.  The Company believes that the presentations and disclosures herein are adequate for a fair presentation.  The unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the interim periods presented.  These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its 2011 Form 10-K.  The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

 

The unaudited interim condensed consolidated financial statements include the accounts of Geokinetics Inc. and its subsidiaries.  All significant intercompany transactions have been eliminated in consolidation.

 

Certain prior period amounts have been reclassified to conform to current period financial statement presentation.

 

Liquidity and Recent Developments

 

On March 15, 2012, the Company entered into a purchase and sale agreement pursuant to which the Company agreed to sell certain North American seismic data in exchange for $10.0 million in cash.  The transaction closed on March 30, 2012.  See note 2.

 

On March 16, 2012, the Company entered into a commitment letter with Avista and an affiliate of Avista to provide up to an additional $10.0 million in debt financing until January 1, 2013.  Avista’s obligations under the commitment letter are subject to the execution and delivery of definitive documents and other closing conditions.  See note 3.

 

During 2011, the Company continued to incur operating losses primarily due to delays in project commencements, low international asset utilization and the Mexico liftboat incident, which resulted in serious concerns about the Company’s liquidity throughout 2011 and continuing into 2012.  To address these liquidity concerns, the Company’s management instituted a number of steps, including the decision to close some of its regional offices and exit certain operations around the world where the long-term prospects for profitability were not in line with the Company’s business goals.  Additionally, the Company’s management is focusing on cost reductions, potential additional sales of assets, further centralization of bidding and management services to provide a higher level of control over costs and bidding on seismic acquisition services under careful consideration of required capital expenditures for additional equipment or restrictions in cash required for bid or performance bonds.

 

Management is focused on improving liquidity through the implementation of the actions described above, however, any unforeseen unfavorable developments could have a material adverse effect on the Company’s liquidity and financial condition.  The Company’s management is currently reviewing alternatives, and it may adopt other strategies that may include actions such as a refinancing or restructuring of the Company’s indebtedness or capital structure, reducing or delaying capital investments, delaying bids on new sales or seeking to raise additional capital through debt or equity financing.  However, the Company’s current credit rating limits the Company’s ability to access the debt capital markets.  In addition, the recent low trading price of the Company’s common stock severely limits the Company’s ability to raise substantial capital in the equity capital markets.  The ability to timely raise sufficient capital may also be limited by NYSE AMEX stockholder approval requirements for certain transactions involving the issuance of the Company’s common stock or securities convertible into the Company’s common stock.

 

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These alternatives may not be successful, and the Company could face a substantial liquidity shortfall and might be required to dispose of certain assets or operations or take other actions to meet its operating and debt service obligations.  The failure to meet its debt service obligations would constitute an event of default under the Whitebox Revolving Credit Facility and the Notes, and the Lenders or Notes holders could declare all amounts outstanding under the Whitebox Revolving Credit Facility or Notes to be immediately due and payable.  In such event, the Company would likely be forced to pursue a restructuring of its indebtedness and capital structure.

 

Recent Accounting Standards Not Yet Adopted

 

In December 2011, the FASB issued an update to ASC 220, Presentation of Comprehensive Income.  This ASU defers a specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income.  The amendment will be temporary to allow the FASB time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income.

 

In December 2011, the FASB and the IASB issued an update to ASC 210, Balance Sheet — Disclosures about Offsetting Assets and Liabilities.  This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  The guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013.  The disclosures required by this ASU should be presented retrospectively for all comparative periods presented.  The Company is currently evaluating the provisions of this ASU.

 

Recent Accounting Standards Adopted

 

In June 2011, the FASB issued an update to ASC 220, Presentation of Comprehensive Income.  This ASU provides an entity with the option to present comprehensive income in either (i) a single statement that presents the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income; or (ii) a two-statement approach which presents the components of net income and total net income in a first statement, immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.  The presentation of other comprehensive income in the statement of changes in equity was eliminated.  The guidance is applied retrospectively and the Company adopted the provisions of this ASU on January 1, 2012, with the exception of those amendments relating to the presentation of reclassification adjustments out of accumulated other comprehensive income, which have been deferred as mentioned above.  The Company elected the option to present comprehensive income in a single statement.  The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements as there were no items related to comprehensive income during the three months ended March 31, 2012 and 2011, respectively.

 

In May 2011, the FASB issued an update to ASC 820, Fair Value Measurements.  This ASU clarifies the application of certain fair value measurement requirements and requires, among other things, expanded disclosures for Level 3 fair value measurements and the categorization by level for items for which fair value is required to be disclosed in accordance with ASC 825, Financial Instruments.  The guidance is applied prospectively and the Company adopted the provisions of this ASU on January 1, 2012.  The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. See note 6.

 

NOTE 2: Selected Asset Information

 

Restricted Cash

 

Total restricted cash consists of short-term investments, primarily certificates of deposit, carried at cost.  In the normal course of business, this amount is primarily cash collateral for letters of credit and performance guarantees.  At March 31, 2012 and December 31, 2011, restricted cash also included cash held in trust of $0.8 million and $0.2 million, respectively, in connection with a short-term project financing agreement entered into in November 2011 by one of our subsidiaries in Latin America.

 

At March 31, 2012, restricted cash classified as non-current included $10.0 million received in connection with the sale of certain North American seismic data.  The proceeds from the sale are restricted pursuant to the Notes indenture and restrictions therein and they shall be used solely for reinvestment in long-term assets.

 

Sales of Certain Accounts Receivable

 

In order to improve the Company’s liquidity, one of the Company’s international subsidiaries in Latin America sells certain eligible trade accounts receivable under a program sponsored by a financial agent of the foreign government to accelerate collections.

 

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There is no recourse to the subsidiary for uncollectible receivables and, once sold, the subsidiary’s effective control over the accounts is ceded.  The cost associated with these sales is calculated based on LIBOR plus five percentage points and the value and due date of the accounts receivable sold.

 

At the time of sale, the related accounts receivable are removed from the balance sheet and the proceeds and cost are recorded.  Accounts receivable sold under this arrangement totaled $33.8 million and $19.4 million during the three months ended March 31, 2012 and 2011, respectively.  The loss on the sale of these accounts receivable during the periods ended March 31, 2012 and 2011 was $0.1 million and $0.1 million, respectively, and is included in operating expenses in the Company’s consolidated statement of operations.

 

Property and Equipment, net

 

Property and equipment is comprised of the following (in thousands):

 

 

 

Estimated

 

March 31,

 

December 31,

 

 

 

Useful Life

 

2012

 

2011

 

 

 

 

 

(unaudited)

 

 

 

Field operating equipment

 

3-10 years

 

$

324,198

 

$

318,530

 

Vehicles

 

3-10 years

 

75,030

 

76,849

 

Buildings and improvements

 

6-39 years

 

10,985

 

10,948

 

Software

 

3-5 years

 

25,773

 

25,554

 

Data processing equipment

 

3-5 years

 

9,781

 

9,765

 

Furniture and equipment

 

3-5 years

 

3,978

 

3,994

 

 

 

 

 

449,745

 

445,640

 

Less: accumulated depreciation and amortization

 

 

 

(248,992

)

(235,281

)

 

 

 

 

200,753

 

210,359

 

Assets under construction

 

 

 

2,272

 

2,277

 

 

 

 

 

$

203,025

 

$

212,636

 

 

The Company reviews the useful life and residual values of property and equipment on an ongoing basis considering the effect of events or changes in circumstances.  Depreciation expense related to the Company’s property and equipment for the three months ended March 31, 2012 and 2011 was $17.8 million and $17.6 million, respectively.

 

On March 30, 2012, the Company entered into an Exchange Agreement pursuant to which the Company exchanged, in a reciprocal transfer, certain of its equipment in North America.  The Company recorded a gain of $3.9 million related to this transaction, which is included in direct operating expenses in the Company’s consolidated statement of operations.

 

The Company stores and maintains property and equipment in the countries in which it does business.  In connection with the acquisition of PGS Onshore in February 2010, the Company acquired certain property and equipment in Libya and entered into an agreement with PGS to operate the business there on the Company’s behalf.  The Company subsequently completed the formation of a subsidiary and acquired certain required licenses to operate its seismic acquisition business.  However, as a result of the civil unrest in Libya, the Company has been unable to operate its business or utilize its equipment in Libya since the first quarter of 2011 and it continues to evaluate options regarding transfer of this equipment out of the area.  At March 31, 2012, the net book value of the equipment in Libya was $8.5 million.  While the Company maintains insurance coverage on these assets, this coverage is limited only to certain defined loss events.  To date, these defined events have not occurred.

 

Multi-Client Data Library, net

 

Multi-client data library consists of seismic surveys that are licensed to customers on a non-exclusive basis.  The Company capitalizes all costs directly associated with acquiring and processing the data, including depreciation of the assets used in production of the surveys.

 

Multi-client seismic library costs and accumulated amortization were as follows (in thousands):

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

Acquisition and processing costs

 

$

148,610

 

$

169,881

 

Less accumulated amortization

 

(119,967

)

(128,369

)

Multi-client data library, net

 

$

28,643

 

$

41,512

 

 

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Amortization expense related to the Company’s multi-client data library for the three months ended March 31, 2012 and 2011 was $15.5 million and $21.7 million, respectively.

 

On March 15, 2012, the Company entered into a Purchase and Sale Agreement (the “Agreement”) pursuant to which the Company agreed to sell certain North American seismic data in exchange for $10.0 million in cash.  The data sold included 4,751 miles of 3D data, and 644 linear miles of 2D data.  The Agreement provides that the Company will retain the right to receive 75% of the net revenues (as defined in the Agreement) generated and collected on this seismic data until the earlier of such time as the Company receives a total of $2.0 million in net revenues or March 7, 2017.  If the Company receives $2.0 million in net revenues prior to March 7, 2017, then the Company will thereafter retain the right to receive 50% of the net revenues generated until March 7, 2017.  The transaction closed on March 30, 2012 and the Company received proceeds of $10.0 million and recorded a loss of $5.1 million on the sale, which is included in direct operating expenses in the Company’s consolidated statement of operations.  Pursuant to the Notes indenture and restrictions therein, the proceeds from the sale will be used for reinvestment in long-term assets; accordingly, at March 31, 2012, these proceeds are included in non-current restricted cash in the Company’s consolidated balance sheet.

 

Deferred Financing Costs

 

The Company had deferred financing costs of $12.3 million and $13.0 million at March 31, 2012 and December 31, 2011, respectively.

 

Changes in deferred financing costs are as follows (in thousands):

 

 

 

Three Months
Ended March 31,

 

Three Months
Ended March 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

Balance at the beginning of the period

 

$

12,987

 

$

11,794

 

Capitalized (1) 

 

300

 

65

 

Amortized

 

(1,025

)

(636

)

Balance at the end of the period

 

$

12,262

 

$

11,223

 

 


(1)          The Company recorded $0.3 million in deferred financing costs in connection with a Commitment Letter entered into during March 2012.  See note 3.

 

Other Assets, Net

 

Other assets, net, are as follows (in thousands):

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

Gross
Carrying
Value

 

Accumulated
Amortization

 

Total Net
Book Value

 

Gross
Carrying
Value

 

Accumulated
Amortization

 

Total Net
Book Value

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Order backlog

 

$

5,700

 

$

(5,700

)

$

 

$

5,700

 

$

(5,629

)

$

71

 

License agreement

 

500

 

(106

)

394

 

500

 

(94

)

406

 

Total intangible assets

 

$

6,200

 

$

(5,806

)

$

394

 

$

6,200

 

$

(5,723

)

$

477

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost method investments

 

 

 

 

 

7,096

 

 

 

 

 

6,713

 

Indemnification receivable from PGS and other

 

 

 

 

 

1,433

 

 

 

 

 

1,447

 

Total other

 

 

 

 

 

8,529

 

 

 

 

 

8,160

 

Total other assets, net

 

 

 

 

 

$

8,923

 

 

 

 

 

$

8,637

 

 

Amortization expense related to the above assets was $0.1 million and $1.2 million for the three months ended March 31, 2012 and 2011, respectively.  The decrease is primarily related to the order backlog, which was fully amortized in January 2012.

 

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NOTE 3: Debt and Capital Lease Obligations

 

Long-term debt and capital lease obligations were as follows (in thousands):

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 

(Unaudited)

 

 

 

Whitebox Revolving credit line —11.125%

 

$

50,000

 

$

50,000

 

Senior Secured Notes due December 2014, net of discount—9.75%

 

296,901

 

296,615

 

Capital lease obligations and notes payable from vendor financing arrangements

 

7,535

 

6,039

 

Other (1)

 

2,280

 

2,072

 

Total

 

356,716

 

354,726

 

Less: current portion

 

(5,751

)

(4,543

)

Total, net (2)

 

$

350,965

 

$

350,183

 

 


(1)          Includes $2.1 million associated with the short-term project financing described below.

(2)          Excludes $55.5 million related to the Company’s mandatorily redeemable preferred stock.  See note 4.

 

Financing Provided by Related Parties

 

On March 16, 2012, the Company entered into a commitment letter (the “Commitment Letter”) with Avista and an affiliate of Avista (collectively, the “Avista Financing Parties”) to obtain debt financing from the Avista Financing Parties until January 1, 2013.  Pursuant to the terms of the Commitment Letter, at the election of the Company from time to time, the Avista Financing parties agreed to (i) purchase up to an additional $10 million in aggregate principal amount of Notes (the “U.S. Avista Notes”) and (ii) enter into foreign loan facilities (the “Foreign Avista Notes” and, collectively with the U.S. Avista Notes, the “Additional Avista Notes”) to be secured by the assets of certain of the Company’s non-U.S. subsidiaries that would be drawn down from time to time concurrently with the purchase by the Avista Financing Parties of any U.S. Avista Notes (the “Commitment”).  In the event that the Company elects to exercise its right to have the Avista Financing Parties purchase any Additional Avista Notes, the Company will be obligated to deliver U.S. Avista Notes with a principal amount equal to the amount of the purchase price and Foreign Avista Notes in an aggregate principal amount equal to 80% of such purchase price, allocated among the Foreign Avista Notes as directed by the Avista Financing Parties.

 

The obligations of the Avista Financing Parties under the Commitment Letter are subject to the execution and delivery of definitive documents and other closing conditions.  In consideration for their obligations under the Commitment Letter, the Company paid the Avista Financing Parties a fee of $0.3 million at the time the Commitment Letter was executed and is obligated to deliver either warrants to purchase 190,000 shares of the Company’s common stock or its cash equivalent value, at the Company’s election, at the earlier of a purchase of any Additional Avista Notes or June 30, 2012 (unless the Commitment is terminated earlier than June 30, 2012 and prior to any such purchase).  The Company will also be obligated to deliver warrants to purchase an additional 190,000 shares of the Company’s common stock or its cash equivalent value, at the Company’s election, at each of June 30, 2012, September 30, 2012 and December 31, 2012 if the Commitment or any Notes remain outstanding as of the applicable foregoing dates.  Certain of the financing transactions under the Commitment Letter are subject to a right of first refusal in favor of certain of the Company’s existing senior lenders, the exercise of which right would cause the Commitment Letter to terminate and require that the Company issue to Avista warrants to purchase 190,000 shares of common stock or its cash equivalent value.

 

In accordance with the terms of the Commitment Letter, the warrants issued in connection with the transactions contemplated under the Commitment will have an exercise price of $0.01 per share of common stock and otherwise will be issued with terms substantially similar to the warrants the Company issued to the Avista Financing Parties in 2010.

 

Through the date of this filing, no financing has been requested in connection with the Commitment Letter.

 

Whitebox Revolving Credit Facility

 

On May 24, 2011, the RBC Revolving Credit Facility was assigned to the Lenders.  The Company entered into an amended and restated credit facility agreement with the Lenders on August 12, 2011.  In connection with this agreement, the Company paid a closing fee of $1.7 million in cash on August 12, 2011, and paid a $4.0 million advisory fee by issuing an aggregate of 1,041,668 shares of common stock (the “Advisory Shares”) to the Lenders on August 29, 2011.  The issuance of the Advisory Shares triggered the anti-dilution provisions of (i) Geokinetics’ Series B Preferred Stock, (ii) warrants issued on July 28, 2008 to purchase up to 240,000 shares of Common Stock (the “2008 Warrants”), and (iii) warrants issued on December 14, 2010 to purchase up to 3,495,000

 

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Table of Contents

 

shares of Common Stock (the “2010 Warrants”).  The closing fee and the advisory fee were recorded as deferred financing costs and will be amortized through the maturity date of this agreement.

 

Borrowings outstanding under the facility bear interest at 11.125%; amounts in excess of the amount outstanding and the total amount available of $50.0 million are subject to an unused commitment fee of 11.125%.  The facility does not provide for the issuance of letters of credit and will mature on September 1, 2014.  Borrowings under the facility are secured by certain of Geokinetics’ and its subsidiaries’ U.S. assets and the pledge of a portion of the stock of certain of its foreign subsidiaries.  There are no scheduled amortization or commitment reductions prior to maturity but the Company is required to prepay the facility with proceeds from certain asset sales.  The Company has the option to prepay the facility upon the issuance of certain equity securities or after the first year, subject to a reduction fee schedule.  The facility has no financial maintenance covenants.

 

Senior Secured Notes Due 2014

 

On December 23, 2009, Holdings issued $300.0 million of Notes in a private placement to institutional buyers at an issue price of $294.3 million or 98.093% of the principal amount.  The discount is accreted as an increase to interest expense over the term of the Notes.  At March 31, 2012 and December 31, 2011, the effective interest rate on the Notes was 11.1%, which includes the effect of the discount accretion and deferred financing costs amortization.  The stated interest rate on the Notes is 9.75% and interest is payable semi-annually in arrears on June 15 and December 15 of each year.  The Notes are fully and unconditionally guaranteed by the Company and by each of the Company’s current and future domestic subsidiaries (other than Holdings, which is the issuer of the Notes).  Pursuant to the terms of an inter-creditor agreement, the Notes are junior to the Whitebox Revolving Credit Facility as to receipt of collateral and/or collateral proceeds securing both the Whitebox Revolving Credit Facility and the Notes.  The Company may redeem up to 10% of the original principal amount of the Notes during each 12-month period at 103% of the principal amount plus accrued interest until the second anniversary following their issuance.  Thereafter, the Company may redeem all or part of the Notes at a prepayment premium which will decline over time.  In the event of occurrence of a change of control, the Company will be required to make an offer to repurchase the Notes at 101% of the principal amount plus accrued interest.  The indenture for the Notes contains customary covenants for non-investment grade indebtedness, including restrictions on the Company’s ability to incur indebtedness, to declare or pay dividends and repurchase its capital stock, to invest the proceeds of asset sales, and to engage in transactions with affiliates.

 

Capital Lease and Vendor Financing Obligations

 

From time to time, the Company enters into capital leases and vendor financing arrangements to purchase certain equipment.  The equipment purchased from these vendors is paid over a period of time.  The amount due under all capital leases and vendor financing arrangements at March 31, 2012 and December 31, 2011 was approximately $7.5 million and $6.0 million, respectively. The net book value of the property and equipment acquired under these capital leases and vendor financing agreements at March 31, 2012 and December 31, 2011 was approximately $9.3 million and $7.9 million, respectively.

 

Foreign Revolving Credit Lines

 

The Company maintains various foreign bank overdraft facilities used to fund short-term working capital needs.  At March 31, 2012, the Company had approximately $1.7 million of available credit of which $0.2 million was outstanding under these facilities.  At December 31, 2011, the Company had approximately $2.4 million, respectively, of available credit and no borrowings were outstanding under these facilities.

 

Short-term Project Financing — Line of Credit Agreement

 

On November 22, 2011, one of the Company’s subsidiaries in Latin America entered into a short-term project financing line of credit agreement secured primarily by the cash flows generated by the underlying project contract.  The cash inflows and outflows associated with this agreement and the underlying project contract are managed through a trust specifically set up for this purpose and required by the agreement.  The trust’s financial statements have been fully consolidated with the Company’s Latin American subsidiary and reflected accordingly.   The maximum credit available under this agreement is $7.6 million of which $2.1 million was outstanding at March 31, 2012 and December 31, 2011.

 

Disbursements under the line of credit agreement are subject to a fee of 3.0% plus VAT and borrowings outstanding under this agreement bear interest at 8.0% plus one-month LIBOR rate, which was 8.0% and 8.45% at March 31, 2012 and December 31, 2011, respectively.  The agreement matures on December 17, 2012 and certain financial covenants apply as long as amounts remain outstanding under the agreement. The Company’s subsidiary was not in compliance with these covenants at December 31, 2011 and subsequently secured a waiver through the maturity of the credit agreement.  The Company’s subsidiary was in compliance with the revised covenants at March 31, 2012.

 

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NOTE 4:    Mandatorily Redeemable Preferred Stock

 

The Company classifies preferred stock, which is not convertible or exchangeable for the Company’s common stock, as a long-term liability as it is considered a mandatorily redeemable financial instrument.  Dividends paid or accrued are reflected as interest expense in the Company’s interim condensed consolidated statements of operations.

 

Mandatorily redeemable preferred stock consisted of (in thousands):

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

Shares

 

$

 

Shares

 

$

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C Mandatorily Redeemable Preferred:

 

 

 

 

 

 

 

 

 

Issued

 

133,982

 

$

33,495

 

133,982

 

$

33,495

 

Discount, net of accretion

 

 

(870

)

 

(927

)

Accrued interest

 

40,619

 

10,155

 

35,637

 

8,909

 

Series C Mandatorily Redeemable Preferred, net

 

174,601

 

 

42,780

 

169,619

 

 

41,477

 

 

 

 

 

 

 

 

 

 

 

Series D Mandatorily Redeemable Preferred:

 

 

 

 

 

 

 

 

 

Issued

 

120,000

 

 

30,000

 

120,000

 

 

30,000

 

Discount, net of accretion

 

 

(22,022

)

 

(22,049

)

Accrued interest

 

19,011

 

4,753

 

15,127

 

3,782

 

Series D Mandatorily Redeemable Preferred, net

 

139,011

 

 

12,731

 

135,127

 

 

11,733

 

Total

 

 

 

$

55,511

 

 

 

$

53,210

 

 

Series C Mandatorily Redeemable Preferred Stock and 2008 Warrants

 

The shares of Series C Preferred Stock were issued to Avista and its affiliate and have an aggregate liquidation preference equal to the liquidation preference of the Series B-2 Preferred Stock (which shares were exchanged for shares of Series C Preferred Stock).  The liquidation value of the Series C Preferred Stock was $43.7 million at March 31, 2012.  The Company is required to redeem the Series C Preferred Stock on December 16, 2015.  The Series C Preferred Stock accrues dividends at a rate of 11.75%.  Dividends accrue until December 16, 2015.  The Series C Preferred Stock is not convertible or exchangeable for Geokinetics’ common stock.  The Series C Preferred Stock has liquidation preference over the Series D preferred stock (see below).

 

For the three months ended March 31, 2012 and 2011, the Company recognized interest expense of $1.3 million and $1.1 million, respectively, related to the Series C Preferred Stock, which includes an immaterial amount for accretion of discount for both periods.

 

The 2008 Warrants have a current exercise price of $9.05 per share.  The 2008 Warrants expire on July 28, 2013 and contain anti-dilution provisions substantially identical to the Series B Preferred Stock such that if the Company issues certain equity securities for a price that is lower than the warrant exercise price, the exercise price of the warrants will be adjusted downward pursuant to a specific formula.  As a result of the anti-dilution provisions, the 2008 Warrants are accounted for at fair value and recorded as derivative liabilities in the Company’s consolidated balance sheets at March 31, 2012 and December 31, 2011.

 

Series D Mandatorily Redeemable Junior Preferred Stock and 2010 Warrants

 

The Series D Preferred Stock was issued to related parties including Avista and its affiliates, PGS, Levant and certain directors of the Company.  Dividends on the Series D Preferred Stock accrue from the date of issuance and are paid in cash or accrued at the election of Geokinetics at a rate of 10.5% per annum and compounded quarterly if paid in cash and 11.5% per annum and compounded quarterly if accrued but not paid.  The Series D Preferred Stock is subject to mandatory redemption on December 15, 2016 and subject to redemption at the option of Geokinetics at the liquidation preference.  The preferred stock was issued at a value of $8.3 million.  The original discount of $21.7 million will be accreted through December 15, 2016 as additional interest expense using the effective interest rate method.  The liquidation value of the Series D Preferred Stock was $34.8 million at March 31, 2012.  The Series D Preferred Stock is not convertible or exchangeable for Geokinetics’ common stock.

 

For the three months ended March 31, 2012 and 2011, the Company recognized total interest expense of $1.0 million and $1.1 million, respectively, related to the Series D Preferred Stock, which includes an immaterial amount for accretion of discount for both periods.

 

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Table of Contents

 

The 2010 Warrants have a current exercise price of $3.84 per share. The 2010 Warrants expire on December 15, 2016 and contain price protection provisions such that if the Company issues certain equity securities for a price that is lower than the warrant conversion price during the two-year period following the issuance date of the 2010 Warrants, the exercise price of the warrants will be adjusted to the price of the newly issued equity securities.  After the two-year period, the exercise price adjusts in accordance with a similar formula as the Series B Preferred Stock.  See note 5.  As a result of the anti-dilution provisions, the 2010 Warrants are accounted for at fair value and recorded as derivative liabilities in the consolidated balance sheets at March 31, 2012 and December 31, 2011.

 

NOTE 5:   Preferred Stock

 

On December 15, 2006, in connection with the repayment of a $55.0 million subordinated loan, the Company issued 228,683 shares of its Series B-1 Preferred Stock, $10.00 par value, pursuant to the terms of the Securities Purchase Agreement dated September 8, 2006, with Avista, an affiliate of Avista and another institutional investor (“Series B Preferred Stock”).  Effective December 18, 2009, the holders of the Series B Preferred Stock and the Company agreed to revised terms including (i) an extension of the redemption date to December 15, 2015; (ii) a reduction of the conversion rate to $17.436; (iii) an option to pay dividends in kind until December 15, 2015; and (iv) an increase in the dividend rate to 9.75%.  In addition, the series of preferred stock was re-designated as Series B Preferred Stock.

 

The Series B Preferred Stock contains certain anti-dilution provisions.  Under these provisions, if the Company issues certain equity securities at a price lower than the conversion price of the Series B-1 Preferred Stock, the conversion price is adjusted to the price per share of the newly issued equity securities.  However, if prior to the issuance of new equity securities, the Company has issued certain equity securities valued at over $50.0 million, the conversion price is adjusted downward pursuant to a specific formula.  In connection with the issuance of the 2010 Warrants on December 14, 2010, the conversion price of the Series B Preferred Stock was reset to $16.40.  In connection with the issuance of the Advisory Shares on August 29, 2011, associated with the Whitebox Revolving Credit Facility, the conversion price of the Series B Preferred Stock was reset to $15.95.

 

Each holder of Series B-1 Preferred Stock is entitled to receive cumulative dividends at the rate of 9.75% per annum on the liquidation preference of $250.00 per share, compounded quarterly.  At the Company’s option through December 15, 2015, dividends may be paid in additional shares of Series B Preferred Stock.  After such date, dividends are required to be paid in cash if declared.  Dividends on the Series B Preferred Stock have been accrued or paid in kind exclusively to date.  At March 31, 2012 and December 31, 2011, the Series B preferred stock is presented as mezzanine equity.

 

At each issuance of the Series B-1 Preferred Stock, the fair value of the Series B conversion feature is bifurcated and recorded as a derivative liability.  The difference between the fair value of the conversion feature and the liquidation preference amount is recorded as additional discount of the Series B-1 Preferred Stock.  The accretion of the additional discount to the preferred stock resulting from bifurcating the Series B conversion feature was $0.3 million and $0.2 million for the three months ended March 31, 2012 and 2011, respectively.

 

The following table sets forth the changes in the carrying value of the Company’s Series B Preferred Stock for the three months ended March 31, 2012:

 

 

 

Shares

 

$
(thousands)

 

 

 

 

 

 

 

Balance at December 31, 2011

 

351,444

 

$

83,313

 

Accrued dividends

 

8,564

 

2,141

 

Fair value of bifurcated conversion feature

 

 

(25

)

Accretion of issuance costs and additional discount

 

 

286

 

Balance at March 31, 2012

 

360,008

 

$

85,715

 

 

NOTE 6:   Fair Value of Financial Instruments

 

Fair Value Measurements

 

The Company categorizes the fair value measurements of its financial assets and liabilities into a three level fair value hierarchy, based on the inputs used in determining fair value.  The categories in the fair value hierarchy are as follows:

 

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Level 1— Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2— Financial assets and liabilities whose values are based on quoted market prices for similar assets and liabilities, quoted market prices for identical assets and liabilities in markets that are not active or other inputs that can be corroborated by observable market data.

 

Level 3— Financial assets and liabilities whose values are based on inputs that are both significant to the fair value measurement and unobservable.  Internally developed valuations reflect the Company’s judgment about assumptions market participants would use in pricing the asset or liability estimated impact to quoted market prices.

 

The Company records derivative liabilities on its balance sheet related to the 2008 and the 2010 Warrants and the conversion feature embedded in the Series B Preferred Stock in the Level 3 category.

 

The Company’s liabilities measured and recorded at fair value on a recurring basis are as follows (in thousands):

 

 

 

March 31, 2012

 

 

 

(Unaudited)

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Conversion feature embedded in Series B Preferred Stock

 

$

1,076

 

$

 

$

 

$

1,076

 

2008 Warrants

 

12

 

 

 

12

 

2010 Warrants

 

2,831

 

 

 

2,831

 

Total derivative liabilities

 

$

3,919

 

$

 

$

 

$

3,919

 

 

 

 

December 31, 2011

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Conversion feature embedded in Series B Preferred Stock

 

$

1,835

 

$

 

$

 

$

1,835

 

2008 Warrants

 

29

 

 

 

29

 

2010 Warrants

 

3,914

 

 

 

3,914

 

Total derivative liabilities

 

$

5,778

 

$

 

$

 

$

5,778

 

 

A reconciliation of the Company’s derivative liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

 

Balance, December 31, 2011

 

$

5,778

 

Total unrealized gains:

 

 

 

Included in earnings

 

(1,884

)

Included in other comprehensive income

 

 

Settlements/Issuances

 

25

 

Transfers in and/or out of Level 3

 

 

Balance, March 31, 2012

 

$

3,919

 

 

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Table of Contents

 

The assumptions used in the valuation models to determine the fair value of the Company’s derivative liabilities are as follows:

 

 

 

 

 

 

 

Input

 

Financial Instrument

 

Valuation
Technique

 

Unobservable Input

 

March 31,
2012

 

December 31,
2011

 

 

 

 

 

 

 

 

 

 

 

Conversion feature embedded in

 

Binomial tree

 

Exercise price

 

$

15.95

 

$

15.95

 

Series B Preferred Stock

 

 

 

Volatility

 

79.74

%

78.43

%

 

 

 

 

Stock Price

 

$

1.76

 

$

2.15

 

 

 

 

 

Option Adjusted Spread

 

22.79

%

30.60

%

 

 

 

 

Risk-free discount rate(1)

 

0.70

%

0.59

%

2008 Warrants

 

Binomial tree

 

Exercise price

 

$

9.05

 

$

9.05

 

 

 

 

 

Volatility

 

79.74

%

78.43

%

 

 

 

 

Stock Price

 

$

1.76

 

$

2.15

 

 

 

 

 

Risk-free discount rate(1)

 

0.24

%

0.19

%

2010 Warrants

 

Binomial tree

 

Exercise price

 

$

3.84

 

$

3.84

 

 

 

 

 

Volatility

 

79.74

%

78.43

%

 

 

 

 

Stock Price

 

$

1.76

 

$

2.15

 

 

 

 

 

Risk-free discount rate(1)

 

0.96

%

0.83

%

 


(1)          Based on the remaining life of the instruments.

 

A binomial tree valuation model uses a “discrete-time” (lattice based) model of the varying price over time of the underlying financial instrument.  Each node in the lattice represents a possible price of the underlying (stock price) at a given point in time.  Valuation is performed iteratively, starting at each of the final nodes (those that may be reached at the time of expiration), and then working backwards through the tree towards the first node (valuation date).  When valuing the above instruments, a lattice representing all possible paths the stock price could take during the life of the conversion and a lattice representing variations in the strike price if certain conditions are met are developed and used in concert.

 

Changes in fair value of the Company’s derivative liabilities are recorded in other income (expense) as unrealized gains and losses.  The fair values of these instruments are subject to material changes primarily associated with fluctuations in the market value of the Company’s common stock.  Generally, as the market value of the common stock increases/decreases, the fair values of these derivative liabilities increase/decrease and a corresponding loss/gain is recorded.  In addition, the estimate of the fair value of these instruments includes other key inputs and assumptions such as option-adjusted spread, volatility and a risk-free discount rate. As the option-adjusted spread increases/decreases, the fair values of these derivative liabilities decrease/increase and a corresponding gain/loss is recorded.  As the volatility and risk-free discount rate increase/decrease, the fair values of these derivative liabilities increase/decrease and a corresponding loss/gain is recorded.

 

The Company is not a party to any hedging arrangements, commodity swap agreements or any other derivative financial instruments.

 

Estimated Fair Value of Financial Instruments

 

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair value due to the short maturity of those instruments, and therefore, have been excluded from the table below. The fair value of debt was determined using quoted market prices if available or the discounted cash flow method of the income approach, as applicable.  The fair value of the mandatorily redeemable preferred stock is calculated by using the discounted cash flow method of the income approach.

 

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The following table sets forth the fair value of the Company’s remaining financial assets and liabilities (in thousands):

 

 

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

Fair Value
Hierarchy

 

Carrying
Amount

 

Fair
Value

 

Carrying
Amount

 

Fair
Value

 

 

 

 

 

(Unaudited)

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

Long-term debt — Notes

 

Level 2

 

$

296,901

 

$

225,000

 

$

296,615

 

$

185,250

 

Long-term debt — Whitebox Revolving Credit Facility

 

Level 3

 

50,000

 

38,750

 

50,000

 

33,277

 

Other(1)

 

Level 2

 

2,280

 

2,280

 

2,072

 

2,072

 

Mandatorily redeemable preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series C

 

Level 3

 

 

42,780

 

 

36,972

 

 

41,477

 

 

25,767

 

Series D

 

Level 3

 

 

12,731

 

 

19,207

 

 

11,733

 

 

14,229

 

 


(1)          Includes short-term debt with maturities of less than one year in markets that are not active.

 

The fair value of debt was determined using quoted market prices if available or the discounted cash flow method of the income approach (“DCF”), as applicable.  The fair value of the mandatorily redeemable preferred stock is calculated by using the DCF method.

 

The assumptions used in the valuation models to determine the fair value of the Whitebox Revolving Credit Facility and the mandatorily redeemable preferred stock at March 31, 2012, are as follows:

 

Financial Instrument

 

Valuation
Technique

 

Unobservable Input

 

Input

 

 

 

 

 

 

 

 

 

Whitebox Revolving Credit Facility

 

DCF

 

Option Adjusted Spread

 

22.79

%

 

 

 

 

Preferred adjustment

 

1.14

%

 

 

 

 

Risk-free discount rate(1)

 

0.70

%

Series C Mandatorily Redeemable

 

DCF

 

Option Adjusted Spread

 

22.79

%

Preferred Stock

 

 

 

Preferred adjustment

 

1.14

%

 

 

 

 

Risk-free discount rate(1)

 

0.70

%

Series D Mandatorily Redeemable

 

Binomial tree

 

Option Adjusted Spread

 

22.79

%

Preferred Stock

 

(Black Derman Toy Method)

 

Preferred adjustment

 

1.43

%

 


(1)          Based on the remaining life of the instruments.

 

Under a DCF model, all future cash flows are estimated and discounted to give their present values.  The sum of all discounted future cash flows, both incoming and outgoing, is the net present value, which is taken as the value or price of the related cash flows. The discount rate incorporates the credit risk of the Company as well as the subordinated nature of Series C mandatorily redeemable preferred stock.  As mentioned above, the binomial tree valuation model uses a “discrete-time” (lattice based) model of the varying price over time of the underlying financial instrument.  When valuing the Series D mandatorily redeemable preferred stock, the lattice represents all possible paths the short term treasury interest rate (six months) could take during the life of the instrument.

 

The estimates of the fair values of the Whitebox Revolving Credit Facility and the mandatorily redeemable preferred stock are subject to material changes primarily associated with the option-adjusted spread.   As the option-adjusted spread increases/decreases, the fair values of these instruments decrease/increase.  Additionally, as the risk-free discount rate and the preferred adjustment increase/decrease, the fair values of these instruments increase/decrease.

 

NOTE 7:   Employee Benefits

 

Stock-Based Compensation

 

The Company’s 2010, 2007 and 2002 Plans provide for granting of (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) phantom stock awards or (vi) any combination of the foregoing to directors, officers and select employees.  At March 31, 2012, 914,940 shares remained available for grant under the 2010 Plan,

 

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34,661 shares under the 2007 Plan, and 116,841 shares under the 2002 Plan.  Stock option exercises and restricted stock are funded through the issuance of authorized but unissued shares of common stock.

 

Because the Company maintained a full valuation allowance on its U.S. deferred tax assets, the Company did not recognize any tax benefit related to stock-based compensation expense for the three months ended March 31, 2012 and 2011.

 

Stock Options

 

The Company granted both incentive stock options and non-qualified stock options to employees and non-employee directors.  Compensation expense related to stock options recognized during the three months ended March 31, 2012 and 2011 totaled $0.2 million and $0.3 million, respectively.

 

Option activity for the three months ended March 31, 2012 is summarized as follows:

 

 

 

Number of
Options

 

Weighted
Average
Exercise Price

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

Balance at December 31, 2011

 

709,550

 

$

9.82

 

2.75

 

Expired

 

 

 

 

Forfeited

 

(4,034

)

4.09

 

 

Exercised

 

 

 

 

Granted

 

17,000

 

2.87

 

 

Balance at March 31, 2012

 

722,516

 

$

9.68

 

4.09

 

Exercisable at March 31, 2012

 

303,580

 

$

15.50

 

2.50

 

 

The weighted average grant-date fair value of options granted during the three months ended March 31, 2012 was $2.41 per share.  The fair value of each option granted is estimated on the date of grant, using the Black-Scholes option pricing model.

 

Options outstanding at March 31, 2012, expire between December 2013 and May 2018, and have exercise prices ranging from $1.94 to $28.00.

 

A summary of the status of our non-vested stock options as of March 31, 2012, and changes during the three months ended March 31, 2012 are presented below:

 

 

 

Number of
Shares of
Restricted

Stock

 

Weighted
Average
Grant-Date Fair
Value per Share

 

Total non-vested at December 31, 2011

 

406,436

 

$

3.70

 

Granted

 

17,000

 

2.41

 

Vested

 

(466

)

12.22

 

Forfeited

 

(4,034

)

2.52

 

Expired

 

 

 

Total non-vested at March 31, 2012

 

418,936

 

$

3.62

 

 

As of March 31, 2012, there was approximately $1.2 million of total unrecognized compensation expense related to stock options outstanding.  That cost is expected to be recognized over the next three years.

 

Restricted Stock

 

In addition to stock options, employees and non-employee directors may be granted restricted stock awards (“RSA”), which are awards of common stock with no exercise price. RSA expense is calculated by multiplying the stock price on the date of award by the number of shares awarded and amortizing this amount over the vesting period of the stock.  The Company recorded compensation expense related to restricted stock of $0.3 million and $0.4 million for the three months ended March 31, 2012 and 2011, respectively, related to these restricted stock awards.

 

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Table of Contents

 

Restricted stock activity for the three months ended March 31, 2012 is summarized as follows:

 

 

 

Number of
Shares of
Restricted

Stock

 

Weighted
Average
Grant-Date Fair
Value per Share

 

Total non-vested at December 31, 2011

 

299,199

 

$

8.44

 

Granted

 

80,000

 

1.89

 

Vested

 

 

 

Forfeited

 

(5,190

)

9.08

 

Total non-vested at March 31, 2012

 

374,009

 

$

7.03

 

 

The weighted average grant date fair value per share for RSA granted in the three months ended March 31, 2012 was $1.89.  There were no RSAs granted in the three months ended March 31, 2011.  There were no RSAs that vested in the three months ended March 31, 2012 and 2011.

 

Because the Company maintained a full valuation allowance on its U.S. deferred tax assets, the Company did not recognize any tax benefit related to stock-based compensation expense for the three months ended March 31, 2012 and  2011.

 

As of March 31, 2012, there was approximately $1.7 million of total unrecognized compensation related to restricted stock outstanding.  That cost is expected to be recognized over the next three years.

 

NOTE 8:   Loss per Common Share

 

The following table sets forth the computation of basic and diluted loss per common share (in thousands, except per share data):

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

Numerator:

 

 

 

 

 

Loss applicable to common stockholders

 

$

(25,650

)

$

(30,974

)

Denominator:

 

 

 

 

 

Denominator for basic and diluted loss per common share

 

18,990

 

17,824

 

Loss per common share:

 

 

 

 

 

Basic and diluted

 

$

(1.35

)

$

(1.74

)

 

The calculation of diluted loss per common share for the three months ended March 31, 2012, excludes options to purchase 588,791 shares of common stock; 374,009 shares of unvested restricted stock; and preferred stock convertible into 5,642,759 shares of common stock, because the effect would be anti-dilutive.

 

The calculation of diluted loss per common share for the three months ended March 31, 2011, excludes options to purchase 383,396 shares of common stock; warrants to purchase 237,306 shares of common stock; 302,627 shares of unvested restricted stock; and preferred stock convertible into 4,984,024 shares of common stock, because the effect would be anti-dilutive.

 

At March 31, 2012 and December 31, 2011, there were outstanding warrants to purchase 3,735,000 shares of common stock.

 

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Table of Contents

 

NOTE 9:    Segment Information

 

The Company’s reportable segments are strategic business units that offer different services to customers.  The Company has two reportable segments: Seismic Data Acquisition and Seismic Data Processing & Integrated Reservoir Geosciences.  The Company further breaks down its seismic data acquisition reportable segment into three reporting units: North America proprietary seismic data acquisition, international proprietary seismic data acquisition and multi-client seismic data acquisition.  The North America and international proprietary seismic data acquisition reporting units acquire data for customers by conducting specific seismic shooting operations for customers in North America (excluding Mexico) and worldwide.  The multi-client seismic data acquisition business unit licenses fully or partially owned seismic data, covering areas in the United States, Canada and Brazil.  The processing and integrated reservoir geosciences segment operates processing centers in Houston, Texas and London, United Kingdom to process seismic data for oil and gas exploration companies worldwide. The Company evaluates the performance of each segment based on Adjusted EBITDA, defined below.

 

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Table of Contents

 

The following table sets forth financial information with respect to our reportable segments (in thousands) (1):

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

Revenue:

 

 

 

 

 

Data Acquisition

 

 

 

 

 

North America proprietary

 

$

64,404

 

$

38,689

 

International proprietary

 

75,043

 

117,141

 

Multi-Client

 

21,495

 

29,085

 

Subtotal Data Acquisition

 

160,942

 

184,915

 

Data Processing & Integrated Reservoir Geosciences

 

4,014

 

3,830

 

Eliminations

 

(1,458

)

(1,108

)

Total

 

$

163,498

 

$

187,637

 

Direct Operating Expenses:

 

 

 

 

 

Data Acquisition

 

 

 

 

 

North America proprietary

 

$

39,587

 

$

29,529

 

International proprietary

 

80,530

 

118,697

 

Multi-Client

 

5,309

 

167

 

Subtotal Data Acquisition

 

125,426

 

148,393

 

Data Processing & Integrated Reservoir Geosciences

 

2,971

 

3,006

 

Eliminations

 

(1,458

)

(1,108

)

Total

 

$

126,939

 

$

150,291

 

Depreciation and Amortization:

 

 

 

 

 

Data Acquisition

 

 

 

 

 

North America proprietary

 

$

3,767

 

$

3,590

 

International proprietary

 

12,444

 

13,710

 

Multi-Client

 

15,507

 

21,689

 

Subtotal Data Acquisition

 

31,718

 

38,989

 

Data Processing & Integrated Reservoir Geosciences

 

423

 

286

 

Corporate

 

1,201

 

1,262

 

Total

 

$

33,342

 

$

40,537

 

Adjusted EBITDA (2):

 

 

 

 

 

Data Acquisition

 

 

 

 

 

North America proprietary

 

$

23,782

 

$

7,925

 

International proprietary

 

(10,525

)

(8,975

)

Multi-Client

 

15,673

 

28,427

 

Subtotal Data Acquisition

 

28,930

 

27,377

 

Data Processing & Integrated Reservoir Geosciences

 

1,036

 

776

 

Corporate

 

(10,655

)

(9,100

)

Total

 

$

19,311

 

$

19,053

 

Reconciliation of Adjusted EBITDA to Net Loss

 

 

 

 

 

Adjusted EBITDA

 

$

19,311

 

$

19,053

 

Provision for income taxes

 

(940

)

(634

)

Interest expense, net of interest income

 

(12,739

)

(11,149

)

Other (income) expense (as defined below)

 

4,486

 

4,496

 

Depreciation and amortization

 

(33,342

)

(40,537

)

Net loss

 

$

(23,224

)

$

(28,771

)

Identifiable Assets: (at end of period)

 

 

 

 

 

Data Acquisition

 

 

 

 

 

North America proprietary

 

$

98,653

 

$

133,439

 

International proprietary

 

269,059

 

443,289

 

Multi-Client (3)

 

56,132

 

96,875

 

Subtotal Data Acquisition

 

423,844

 

673,603

 

Data Processing & Integrated Reservoir Geosciences

 

8,773

 

9,912

 

Corporate

 

45,388

 

44,416

 

Total(4)(5)

 

$

478,005

 

$

727,931

 

 


 

(1)

During the fourth quarter of 2011, the Company re-assessed its operating segments and concluded that its multi-client data library business is a separate operating segment.  Accordingly, prior periods have been restated.

 

(2)

The Company defines Adjusted EBITDA as net income (loss) (the most directly comparable GAAP financial measure) before Interest, Taxes, Other Income (Expense) (including foreign exchange gains/losses, loss on early redemption of debt, gains/losses from changes in fair value of derivative liabilities and other income/expense), Asset Impairments and Depreciation and Amortization.  The Chief Operating Decision Maker (“CODM”) primarily evaluates operating segment profitability through the use of this measure.  However, as the majority of operating costs directly associated with acquiring and processing multi-client data are capitalized and amortized based on a specific formula, the CODM also considers the impact of amortization expense when specifically evaluating multi-client’s segment profitability.

 

(3)

The North America proprietary segment shares certain productive assets used in its operations with the multi-client segment.  Those productive assets are presented as part of the North America segment.  Multi-client assets presented in the table above only include those assets specifically identified with the multi-client seismic data acquisition business such as cash, accounts receivable and the multi-client seismic data library.

 

(4)

During the first quarter of 2012, capital expenditures, including capitalized leases and capitalized depreciation to multi-client, totaled $1.1 million, $2.6 million, $17.7 million and $0.1 million for North America proprietary, international proprietary, multi-client and data processing and integrated reservoir geosciences, respectively.

 

(5)

During the third and fourth quarters of 2011, the Company recorded goodwill impairment charges totaling $132.4 million. Accordingly, since December 31, 2011, the Company had no goodwill.

 

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Table of Contents

 

NOTE 10: Income Taxes

 

The provision for income tax for the three months ended March 31, 2012 and 2011, was $0.9 million and $0.6 million, respectively.  While the Company had pretax losses during the three months ended March 31, 2012 and 2011, the income tax provision for these periods relate primarily to taxes due in countries with deemed profit tax regimes, withholding taxes and the release of valuation allowance in certain foreign jurisdictions with current year operating profits based on the Company’s reevaluation of the realizability of these future tax benefits.

 

The following summarizes changes in the Company’s uncertain tax positions for the three months ended March 31, 2012 (in thousands):

 

Balance at December 31, 2011

 

$

9,770

 

Increase in tax positions related to current period

 

 

Interest

 

191

 

Balance at March 31, 2012

 

$

9,961

 

 

The Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense.  At March 31, 2012 and December 31, 2011, the Company had $3.2 million and $3.0 million, respectively, of accrued interest related to unrealized tax benefits.  The tax years that remain subject to examination by major tax jurisdictions are from 2005 to 2011.

 

NOTE 11:   Litigation and Contingencies

 

Mexico Liftboat Incident

 

The Company is a defendant in lawsuits arising out of the September 8, 2011 liftboat incident in the Bay of Campeche, Gulf of Mexico filed by two surviving crewmembers of the liftboat who were employees of the liftboat owner/operator and the heirs of two deceased crewmembers of the liftboat who were employed by the liftboat owner/operator and the heirs of two decedents who were employees of a Geokinetics operating company. The current lawsuits are: Randal Reed v. Trinity Lifeboat Services, LLC, Trinity Lifeboat Services No. 2 LLC.; United States District Court, Western District of Louisiana, Lafayette Division, C.A. No. 6:11-cv-01868; and Ted Derise, Jr., et al. v. Advanced Seismic Technology, Inc.; 11th Judicial District Court of Harris County, Texas; C.A. No. 2012-12812; These matters are at an early stage in the litigation process; accordingly, the Company currently cannot assess the probability of losses, or reasonably estimate a range of any potential losses related thereto. The Company intends to vigorously defend itself in these proceedings.

 

California Labor Class Action

 

On July 13, 2011, the Company was named as a defendant in a lawsuit styled Moncada, et al. v. Petroleum Geo-Services, et al. filed in the Superior Court of California in Kern County. This is a wage-and-hour class action lawsuit where the plaintiffs claim that they were not properly compensated from June 2009 to April 2010 for meal and rest breaks, in addition to overtime pay. This matter is at an early stage in the litigation process; accordingly, the Company currently cannot assess the probability of losses, or reasonably estimate a range of any potential losses related to the proceeding. The Company intends to vigorously defend itself in this proceeding.

 

Taxes Related to International Operations

 

Historically, the Company did not adequately monitor the time in country for its third country nationals performing work for the Company in certain countries in which it operated and thus may have under reported the taxes due for these employees. The Company has made an assessment of the potential liability related to these taxes and has recorded a provision at March 31, 2012 and December 31, 2011.

 

International Labor Claims

 

The Company has received adverse verdicts with respect to several international labor claims and is currently appealing these verdicts.

 

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Table of Contents

 

Other Contingencies

 

The Company is party to various other claims and legal actions arising in the ordinary course of business. Management is of the opinion that none of these claims and actions will have a material adverse impact on the Company’s financial position, results of operations, or cash flows.

 

With respect to the Company’s various contingencies, the Company had a provision of $13.8 million and $12.7 million, included in accrued expenses at March 31, 2012 and December 31, 2011, respectively, for estimated costs related to these claims.

 

NOTE 12:   Related Party Transactions

 

Acquisition of PGS Onshore

 

Following the acquisition of PGS Onshore, we entered into transactions that were contemplated by the purchase agreement, which are summarized below:

 

Transition Services Agreement.  In the transition services agreement, PGS agreed to provide the Company with office facilities, accounting, information, payroll and human resources following the closing.  During the three months ended March 31, 2010, the Company paid fees of $1.2 million related to this agreement. The services were provided by PGS through July 30, 2010.

 

Libya Agreement  The Company entered into an agreement with PGS whereby PGS agreed to operate the Company’s seismic data acquisition business in Libya for the Company’s benefit until completion of the formation of a subsidiary in Libya and acquisition of the required licenses to own and operate the business in Libya.  The Company agreed to reimburse PGS for the costs of operating the business for the Company’s benefit.  During the fourth quarter of 2010 and the first quarter of 2011, the Company formed a subsidiary in Libya and acquired certain licenses necessary to operate its business there.  However, the civil unrest in Libya has made transfer of the business to the Company impractical, and, accordingly, the Libya agreement has been extended.

 

Other

 

On August 12, 2011 the Company entered into an amended and restated credit agreement with the Lenders for the Whitebox Revolving Credit Facility. Mr. Gary L. Pittman, the Company’s Executive Vice President and Chief Financial Officer, is a passive investor in, and holds approximately 0.2% of the total assets of ECF Value Fund, L.P. and approximately 0.3% of the total assets of ECF Value Fund International, Ltd. which are two of the Lenders participating in the amended and restated credit agreement at March 31, 2012.

 

During the three months ended March 31, 2012 and 2011, the Company paid fees of less than $0.1 million and $0.1 million, respectively, for freight broker services provided by Total Connection, a company owned and operated by the spouse of an employee of the Company.  Additionally, during the three months ended March 31, 2012 and 2011, the Company paid fees of approximately $0.3 million and $0.1 million for permitting services provided by Complete Geo Land Services, LLC, a company owned and operated by the spouse of an employee of the Company.

 

During the three months ended March 31, 2012 and 2011, the Company recorded revenue of approximately $0.2 million and $0.2 million, respectively, for seismic data processing services provided to Carmot Seismic AS, a Norwegian company partially owned by the spouses of two employees of the Company and where the two Company employees are Directors.

 

NOTE 13:   Condensed Consolidating Financial Information

 

The Notes are fully and unconditionally guaranteed, jointly and severally, by the Company, and by each of the Company’s current and future domestic subsidiaries (other than Holdings, which is the issuer of the Notes).  See note 3.  The non-guarantor subsidiaries consist of all subsidiaries and branches outside of the United States.  Separate condensed consolidating financial statement information for the parent, guarantor subsidiaries and non-guarantor subsidiaries at March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011 is as follows (in thousands):

 

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Table of Contents

 

 

 

BALANCE SHEET

 

 

 

March 31, 2012
(Unaudited)

 

 

 

Guarantor
Parent
Company

 

Issuer
Subsidiary

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

3,351

 

$

 

$

116,776

 

$

95,025

 

$

 

$

215,152

 

Property and equipment, net

 

14,927

 

 

167,820

 

20,278

 

 

203,025

 

Investment in subsidiaries

 

197,931

 

377,362

 

44,118

 

14,207

 

(633,618

)

 

Intercompany accounts

 

(6,948

)

68,925

 

52,485

 

(114,462

)

 

 

Other non-current assets

 

970

 

21,292

 

29,789

 

7,954

 

(177

)

59,828

 

Total assets

 

$

210,231

 

$

467,579

 

$

410,988

 

$

23,002

 

$

(633,795

)

$

478,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities, Mezzanine and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

19,459

 

$

8,694

 

$

87,221

 

$

85,272

 

$

 

$

200,646

 

Long-term debt and capital lease obligations, net of current portion

 

 

346,901

 

522

 

3,542

 

 

350,965

 

Deferred income taxes and other non-current liabilities

 

32,758

 

 

30,819

 

1,138

 

 

64,715

 

Derivative liabilities

 

3,919

 

 

 

 

 

3,919

 

Total liabilities

 

56,136

 

355,595

 

118,562

 

89,952

 

 

620,245

 

Mezzanine equity

 

85,715

 

 

 

 

 

85,715

 

Stockholders’ equity (deficit)

 

68,380

 

111,984

 

292,426

 

(66,950

)

(633,795

)

(227,955

)

Total liabilities, mezzanine equity and stockholders’ equity (deficit)

 

$

210,231

 

$

467,579

 

$

410,988

 

$

23,002

 

$

(633,795

)

$

478,005

 

 

 

 

BALANCE SHEET
December 31, 2011

 

 

 

Guarantor
Parent
Company

 

Issuer
Subsidiary

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

971

 

$

 

$

134,119

 

$

103,310

 

$

 

$

238,400

 

Property and equipment, net

 

16,666

 

 

174,564

 

21,406

 

 

212,636

 

Investment in subsidiaries

 

197,931

 

377,362

 

44,118

 

14,206

 

(633,617

)

 

Intercompany accounts

 

23,454

 

80,834

 

12,845

 

(117,133

)

 

 

Other non-current assets

 

1,079

 

11,908

 

42,572

 

7,754

 

(177

)

63,136

 

Total assets

 

$

240,101

 

$

470,104

 

$

408,218

 

$

29,543

 

$

(633,794

)

$

514,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities, Mezzanine and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

48,482

 

$

1,565

 

$

78,914

 

$

86,362

 

$

 

$

215,323

 

Long-term debt and capital lease obligations, net of current portion

 

 

346,615

 

 

3,568

 

 

350,183

 

Deferred Income tax and other non-current liabilities

 

30,458

 

 

30,798

 

1,138

 

 

62,394

 

Derivative liabilities